Rate of return is a relative number. The same system produces different rates of return for different account sizes. Somewhat larger account can just provide more breathing space and lower the risk of being margined out (and lower rate of return).
Naturally if the account has a multiple size it allows increase position sizes accordingly.
This leads me to another question - how to determine the minimum account size for a system (and free up capital for other trading)? Are you going to cover this in one of the future installments of your Trading Process mini-series?
Great comment! For most of us (with limited accounts), rate of return, drawdown, and risk of ruin are all important, and all highly dependent on starting capital.
I'll be covering this topic in a later step in the "Trading Process."
On Trading Process/ Rate of Return:
ReplyDeleteRate of return is a relative number. The same system produces different rates of return for different account sizes. Somewhat larger account can just provide more breathing space and lower the risk of being margined out (and lower rate of return).
Naturally if the account has a multiple size it allows increase position sizes accordingly.
This leads me to another question - how to determine the minimum account size for a system (and free up capital for other trading)? Are you going to cover this in one of the future installments of your Trading Process mini-series?
Great comment! For most of us (with limited accounts), rate of return, drawdown, and risk of ruin are all important, and all highly dependent on starting capital.
ReplyDeleteI'll be covering this topic in a later step in the "Trading Process."